Skip to content

ACCA Strategic Professional · Advanced Audit and Assurance (International) · Professional and ethical developments

Tarn & Co audits Orbit plc, a public interest entity. The engagement partner has audited Orbit for six years and is now being considered to act as a non-executive director of a private company that is a major supplier of Orbit. Which statement best reflects the application of the IESBA Code's conceptual framework?

The firm must evaluate whether threats such as self-interest and familiarity are at an acceptable level, and address them if not. If they cannot be eliminated or reduced to an acceptable level, the partner must decline the directorship or withdraw from the engagement. Disclosure to management alone is insufficient.

  1. AThe firm may ignore the matter because the supplier is a separate legal entity from the client
  2. BThe firm must evaluate whether threats, such as self-interest and familiarity, are at an acceptable level; if not, it must address them, and if they cannot be addressed the role must be declined or the engagement withdrawn fromCorrect
  3. CThe role is automatically permitted if the partner discloses it to Orbit's management only
  4. DThreats can be assessed only after the audit report is signed

Explanation

The conceptual framework requires identifying, evaluating and addressing threats. A directorship in a major supplier creates potential self-interest and familiarity threats. If they cannot be eliminated or reduced to an acceptable level, the partner should decline the role or step off the engagement. Disclosure to management alone does not resolve the threats, and assessment cannot wait until after reporting.

Did you get it right without looking?

One question tells you little. A timed set on Professional and ethical developments shows your real accuracy, how long you take and where you lose marks.

Practise Professional and ethical developmentsFree diagnostic mock

More Professional and ethical developments questions